Federal Tax Lien Can Attach to Agreement by Business Buyer to Make Payments to Seller's Former Spouse for Alimony Obligation
In Email Chief Counsel Advice 202226010[1] IRS counsel gave its conclusion on whether a federal tax lien (FTL) could be attached to payments made by the purchaser of a business to the seller’s former spouse to cover an alimony obligation of the seller who now faced a collection action related to a federal tax liability. This payment structure was entered as part of the taxpayer’s divorce action and was in effect prior to when the federal tax lien arose.
Read MoreIRS Extends Late Portability Election Automatic Relief from Two to Five Years and Provides Additional Guidance
The IRS has issued a revised Revenue Procedure providing for a late portability election available to qualifying estates in Revenue Procedure 2022-32.[1] The procedure supersedes Revenue Procedure 2017-34 and becomes the only method by which a late election may be made for any estate that qualifies to use this procedure.
Read MoreTaxpayer Had Enough of a Guarantee Business Would Be Able to Keep Funds Received That The Amounts Immediately Constituted Income
We don’t often write about criminal tax cases here on this site, but the case of United States v. VanDemark[1] discusses a taxpayer who, per the beginning of the Sixth Circuit opinion “tried to hoodwink the IRS.”[2] Of interest outside the criminal tax controversy context, he attempted to argue in his defense that he did not have to report cash deposits he received as income due to lack of “some guarantee” the business would keep the funds, an argument the appellate panel did not find persuasive given the facts of his case.
Read MoreFifth Circuit Rules Substantial Compliance Cannot Excuse Failure to Follow Charitable Contribution Requirements Found in the Statute
The Fifth Circuit Court of Appeals sustained the Tax Court’s decision[1] denying a taxpayer a charitable contribution deduction in the case of Izen v. Commissioner,[2] finding that a taxpayer must strictly follow the documentation requirements set out by Congress in the statute to obtain a charitable contribution deduction.
This case was covered back when the Tax Court released its decision in 2017 on our tax update webpage[3] and involved a taxpayer’s attempt to claim a deduction for a donation for an aircraft on an amended income tax return.
Read MoreWhile IRS Announces Agency Has Met a Milestone in Processing Returns, the National Taxpayer Advocate Points Out the Situation is Worse Than a Year Ago
While the IRS posted a news release[1] announcing the agency had hit a key milestone in dealing with paper return filings that have been backlogged since the pandemic began, the National Taxpayer Advocate issued a report[2] a day later showing the agency had lost ground over the past year in attempting to catch up on dealing with such returns.
Read MoreSupreme Court to Resolve Split Among Circuits on How to Apply FBAR Penalties
The US Supreme Court has agreed to hear the taxpayer’s appeal of the Fifth Circuit Court of Appeals decision in the case of Bittner v. United States.[1] The key issue is whether, in assessing penalties for failing to report interests in foreign accounts on an annual FBAR, the penalties apply on a per-account or per-reporting form basis, a matter which was decided differently in 2021 cases heard by the Fifth and Ninth Circuits.
Read MoreIRS Adds Voice Bots for Certain ACS Matters
The IRS in News Release IR-2022-127[1] announced they have made available automated voice bot options to assist taxpayers in verifying their identities and setting up payment plans.
The release begins:
The Internal Revenue Service today announced expanded voice bot options to help eligible taxpayers easily verify their identity to set up or modify a payment plan while avoiding long wait times.
“This is part of a wider effort at the IRS to help improve the experience of taxpayers,” said IRS Commissioner Chuck Rettig. “We continue to look for ways to better assist taxpayers, and that includes helping people avoid waiting on hold or having to make a second phone call to get what they need. The expanded voice bots are another example of how technology can help the IRS provide better service to taxpayers.”[2]
Read MoreNurse's Comfortable and Professional Clothing Worn Outside the Operating Room Found to Be a Deductible Business Expense
The Tax Court found that clothes purchased by a nurse to meet an employer’s requirements that she be dressed in comfortable clothes and in a manner that reflected her profession as a nurse qualified as a deductible business expense in the case of Romana v. Commissioner, TC Summary Opinion 2022-9.[1]
Read MoreInnocent Spouse Relief Not Avaialble for Trust Fund Penalty Liability
In the case of Chavis v. Commissioner,[1] 158 T.C. No. 8, Angela Chavis argued, in part, that she should not be liable to pay a portion of a trust fund penalty under IRC §6672 because she should qualify for innocent spouse relief. The Tax Court denied her requested relief, finding that the innocent spouse provisions only apply to amounts due on joint income tax returns.
Read MoreApplication of Foreclosure Proceeds Could Create Deductible Interest Expense, But Taxpayer Failed to Show It Actually Did So
The Tax Court had to look at a taxpayer’s attempt to claim a deduction for interest paid on a home equity credit line by the application of funds when the property was foreclosed in the case of Howland v. Commissioner, TC Memo 2022-60.[1] And the Tax Court found that the answer isn’t quite as clear as you might expect at first glance.
Read MoreIRS Denies a Taxpayer Permission to Make a Late 3115 Filing After Failing to Request Permission Years Earlier
Not understanding and following proper procedures can come back to haunt taxpayers, even if they do something that they would have been allowed to do if they had followed the proper procedures. In PLR 202223011[1] the IRS denied the taxpayer’s request to file a Form 3115 for an overall accounting method change from the cash to accrual basis it had made without asking for permission years earlier.
Read MoreIRS Announces 4 Cents Per Mile Increase in Certain Mileage Deduction for Last 6 Months of 2022
On May 13, eighteen members of Congress wrote the IRS asking for the agency to increase mileage rates in recognition of the rapid rise in the price of gasoline since the beginning of 2022.[1] The letter pointed out that the IRS had previously raised the rate mid-year in 2011, noting the increases this year are more substantial than those that prompted the increase in rates in 2011.
The IRS has now decided to take action to increase some mileage rates by 4 cents per mile effective July 1, announcing the change to be in effect for the last six months of 2022 in Announcement 2022-13.[2]
Read MoreAICPA Letter Gives Recommendation on Guidance on Upcoming TCJA Requirement to Amortize Rather Than Expense R&D Expenses
The AICPA sent a letter[1] to IRS Associate Chief Counsel Holly Porter (Passthroughs and Special Industries) with comments regarding the need for guidance on research and experimental expenditures under IRC §174.
The Tax Cuts and Jobs Act revised IRC §174 so that, effective for tax years beginning after December 31, 2021, specified research or experimental expenditures are no longer currently deductible by a business, but rather must be amortized over 5 years for domestic research and 15 years for foreign research.
Read MoreTax Advantage Employer Leave-Based Donation Programs for Ukraine Relief Authorized Through End of 2022
In Notice 2022-28[1] the IRS announced that employers can establish tax advantaged programs where employees donate some or all of their unused paid leave for certain relief for victims of the further Russian invasion of Ukraine.
This type of leave-based donation program has been authorized on a short-term, limited basis by the IRS previously in response to the 9/11 terrorist attacks, certain natural disasters and the COVID-19 pandemic.
Read MorePayments Made by Physician Ruled Not to Be Deductible Alimony
While the Tax Cuts and Jobs Act ended the deduction for alimony payments for divorces finalized after 2018, we still have to deal with the status of payments for divorces prior to that date. In the case of Ibrahim v. Commissioner, TC Summary Opinion 2022-7,[1] the Tax Court ruled payments from a physician to his former spouse did not meet the criteria to be alimony under the law.
Read MoreIRS Issues Likely Final Extension of Relief Allowing Certain Plan Documents to Be Signed Remotely
The IRS has again extended temporary relief from the physical presence requirement for executing certain plan documents in front of a plan representative or notary public in Notice 2022-27.[1] The relief was first provided in Notice 2020-42 as a response to the COVID-19 pandemic and most recently had been extended by Notice 2021-40 through June 30, 2022. The new notice extends this relief through the end of 2022.
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